SCARY

OpenAI models secretly broke out of a secure environment and hacked into a rival company to cheat on a test

OpenAI said Tuesday that two of its AI models autonomously hacked their way out of a controlled environment where they were supposed to be walled off from internet access and then hacked their way into the systems of Hugging Face, a company that hosts open-source AI models, in order to cheat on an internal evaluation, according to Fortune’s Jeremy Kahn and Emily Forlini.

OpenAI disclosed the incident in a blog post on Tuesday, a stunning announcement that is certain to set off alarm bells across the industry about the increasing power of AI models and the risk of them going rogue. 

Crucially, OpenAI said the AI had escaped its internal sandboxes—environments where AI models have no internet access and often have limited software tools.

MACGUFFIN

What we know about the hardware device Jony Ive is designing for Sam Altman

It has been roughly one year since OpenAI acquired Jony Ive’s io Products for $6.5 billion, and sources tell Fortune’s Emily Forlini and Sebastian Herrera that the design of the initial hardware device has been finalized, while work on a broader family of AI devices proceeds. 

OpenAI’s device is expected to ship as early as next year but is still something of a mystery. It could be a home-speaker-like device that will serve as an active AI companion and feature moving mechanical parts designed to mimic human behavior. 

The io team has been integrated into the parent company as the OpenAI hardware group. While OpenAI’s leadership and the majority of its staff work out of the company’s HQ in San Francisco’s Mission Bay district, the hardware team, which is now more than 400 employees, still works out of the original io building in Jackson Square on the other side of town.

TOKEN EFFORTS

Ain't nothin' goin' on but the tokens—expect CFO resistance to AI billing 

“For many companies, AI prices now resemble utility bills more than traditional software subscriptions,” according to Justin Biemann at Morgan Stanley. The average price of an AI token—the basic unit of text that AI companies charge for on a per-token basis—has gone up 60% since December 2025 (although it has moderated recently). The price of AI depends heavily on what you are using it for, as this chart shows:

CFOs are likely to mount resistance to ever-spiraling AI bills, Biemann believes, especially if they can’t see the ROI.

“Some estimates suggest a software engineer at a firm with Claude’s enterprise subscription could rack up a token bill of up to $730 each month. Hypothetically, that means a typical Fortune 500 firm with 5,000 engineers would exceed $3.5 million in monthly expenses for AI coding...These usage levels have been rising rapidly and could be running into a budgetary brick wall,” Biemann said in an email.

IRAN

U.S. escalates attacks on Iran as White House says Tehran is 'not serious' about talks

The price of oil rose sharply in the last 24 hours, from $88 per barrel of Brent Crude to $93, as the U.S. conducted an 11th straight night of strikes on various targets in Iran.

Centcom said it struck “military operations centers, maritime capabilities, aircraft hangars, drone storage facilities, and military logistics infrastructure.”

In retaliation, Iran struck sites in Kuwait, Bahrain, and Jordan, the BBC reported. Iran has attacked more than 30 ships in the Strait of Hormuz in the last three months, Centcom said, while also insisting that the waterway was open for business.

President Donald Trump said Iran’s remaining nuclear sites would be targeted next. U.S. Secretary of State Marco Rubio said Iran was “not serious” about peace talks.

Behind the scenes: Mediators are still shuttling between the two sides.

• Iran Shows Its Ballistic Missiles Are Still a Force to Reckon With - WSJ
• Iran-Backed Houthis Now Ready to Attack Ships, Naval Group Says - Bloomberg

THE MARKETS

Oil is back above $90 again, 'reviving fears about a wider stagflationary shock'

With the “Memorandum of Understanding” in tatters and violence in the Middle East on the rise, traders naturally bid up the price of oil and returned to the idea that oil-driven inflation might push the Fed to raise interest rates. Both Goldman Sachs and ING have floated the idea that oil could rise to $120 per barrel. The rising cost of Brent Crude is “reviving fears about a wider stagflationary shock,” Deutsche Bank’s Jim Reid said in an email this morning.

Seventy-five percent of bettors on Fed futures think the U.S. central bank will keep rates on hold this month at the 3.5% level, according to CME Fedwatch—an unusually low level of confidence for that index, which is usually resolved at greater than 90%, certainty in the days before a FOMC meeting. It’s even more split for the September meeting—only 53% think the rate will stay on hold. 32.5% think there will be a cut (implying they believe a weakening economy will need the help of cheaper money) and 13.8% see a rate rise. 

• S&P 500 futures were down 0.2% this morning. The index rose 0.89% yesterday. 
• In Europe, the Stoxx 600 was up 0.6% in early trading and the U.K.’s FTSE 100 was up 1.25% before lunch.
• Asia: South Korea’s KOSPI was up 0.74%. Japan’s Nikkei 225 was down 0.18%. India’s Nifty 50 was down 0.83%. China’s CSI 300 was down 0.46%. 
• Brent crude rose to $93 per barrel this morning. (Chart below from TradingEconomics.com.)
• Bitcoin was $65.9K.

After 42 years of playing golf, Deutsche Bank’s Jim Reid reported today that he scored his first hole-in-one at the weekend.

Must-read: After SpaceX’s $2 trillion debut, investors are eyeing Anthropic and OpenAI. Market experts share how to play the next trillion-dollar IPO - Amanda Gerut

MORE FROM FORTUNE

George Soros never signed the Giving Pledge. He’s given away more of his fortune than the billionaires who did - Sydney Lake

Panera founder and Cava chairman Ron Shaich bets $100 million on Level99, bringing his restaurant industry playbook to entertainment - Catherina Gioino

‘The audience is telling the industry something’: even IMAX is stunned by Christopher Nolan’s runaway ‘Odyssey’ - Tatiana Sataua

Billionaire Mike Bloomberg warns Trump’s AI ownership plan would make ‘George Orwell blush’ - Eva Roytburg

Lawmakers say they’re protecting kids—but their age checks are quietly building an ID requirement for the entire internet - Catherina Gioino

UN’s worst-case scenario: Energy and fertilizer shock from Iran war could push nearly 19 million more into chronic hunger by 2030 - Mia Osmonbekov

The American Heart Association has a new number for daily coffee—and a warning if you go over it - Orianna Rosa Royle

SPECTACULAR

Meta’s glasses could create an $18 billion market, according to Jefferies

While the launch of Meta’s smart glasses initially met a wave of skepticism—do we really want to live inside an always-on surveillance state in which everyone spies on everyone else and Facebook keeps the data?—Brent Thill and his colleagues at Jefferies are bullish on the new device. If they are adopted at a similar rate to Apple Watch, Meta could be looking at a business with revenues of $14 to $18 billion per year, they estimate. 

“Our team bought and tried on three different models of Meta's AI glasses and came away impressed. Camera quality, seamless setup, and a normal-glasses form factor stood out. While we see areas to improve, META has a first-mover advantage,” they said in an email.

CHART OF THE DAY

Bad news, astronomers—your job is most likely to be replaced by AI

This chart from Apollo Global Management’s Torsten Sløk shows how likely a job is to be replaced by AI on the horizontal axis, based on a survey of experts. So, at the far left, everyone agrees that hairdressers and masseurs have a near-zero chance of being replaced by AI. 

But on the vertical axis, the chart shows how much disagreement there is among those experts about whether a job will be replaced. So, at the far right of the axis, there is disagreement as to whether telemarketers or mathematicians will be replaced. Clearly, they could be replaced, but there are also obvious advantages in keeping a human hand on the wheel of those industries.

Astronomers have it worst. Not only is this profession highly exposed to AI, the experts largely agree that stargazers will be replaced by robots and algorithms.

NUMBER OF THE DAY: NOODLES

5.151 billion

The number of servings of instant noodles sold in the U.S. annually, according to the World Instant Noodles Association, which is a thing that exists in real life. The U.S. is “the largest instant noodle market outside Asia,” according to Linda Huang and her colleagues at Macquarie, despite the fact that American per-capita consumption of noodles is only 15 servings per year. That’s well below 20 in Australia, 31 in China, and 48 in Japan.

THE FRONT PAGES TODAY

The US has collected about $13bn of Venezuela’s oil money. Where is it? - FT

Trump’s push for American-made AI chips hits TSMC’s margins - CNBC

U.S. measles cases surpass last year's total: Tracker - Axios

The Startup Insiders Who Stash Huge Sums in Tax-Subsidized Retirement Accounts - WSJ

Trump’s 100% Generic Drug Duty Threatens US Low-Cost Supply - Bloomberg

ONE MORE THING

$90,000 Wilt Chamberlain jacket found in a thrift store

A warmup jacket worn by Wilt Chamberlain during the 1972 NBA finals that was bought by a teenager for $3.07 at an Oregon thrift store sold for $89,600 at auction on Monday, the AP reports. Quinn Brown had been eyeing a massive bin of clothes at a Goodwill store outside Portland in January when he saw someone toss a Lakers jacket with Chamberlain’s name on it back on the pile. Brown, who resells used clothes online, quickly grabbed it. The jacket was auctioned by Sotheby’s, which had estimated its value between $150,000 and $250,000 before bidding closed Monday. It received a total of 48 bids, according to the auction house.

Here, wonderfully preserved by Getty Images, is a photo of Chamberlain wearing what appears to be that exact jacket in 1971:

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